Some of you might think it is good that the United States Congress is considering a billionaire's tax. After all, it is time for those greedy bastards to pay up.
Is this your view on things?
Well, I have news for you: this is going to be a tax on everyone. If one takes time to learn about history, that is always what happens. The taxes raised while the definitions of "rich" are changed to ensnare more people.
Income Tax
In 1913, one of the major pieces of legislation was the introduction of the Income Tax. This was something that was part of a broader plan that radically alters the United States.
Many were in favor of the income tax because it applied to everyone. This is something that most people believe: they should personally pay more in taxes.
Catch you off guard. Of course few believe he or she should personally pay more in taxes. They why was the Income Tax favored and how did the politicians pass it without being drawn and quartered?
The answer is simple. It was sold as only applying to the rich. As we all know, this is not the case.
Here are some of the numbers.
The Revenue Act of 1913 ushered in the income tax. This one move forever changed the way of life for most American adults.
Here is the kicker: the tax was 1% applied to those making over $3,000. This affected a very small percentage of the population. In fact, due to deductions, less than 1% of the population had to pay it.
Certainly things have changed.
Value Added Tax
This is an example for our UK counterparts. Those who live in that country are well aware of this tax.
According to Wikipedia, the VAT was enacted to replace the onerous Purchase Tax. Notice how the tax rate bounced around.
Purchase Tax was applied to the wholesale price, introduced during World War II, initially at a rate of 33 1⁄3%. This was doubled in April 1942 to 66 2⁄3%, and further increased in April 1943 to a rate of 100%, before reverting in April 1946 to 33 1⁄3% again.
Isn't that just special. The tax rate was doubled then went up another 50% before being reduced. This was a tax applied at the manufacturing and distribution levels.
It was then replaced with the Value Added Tax. This one was started in 1973.
Long story short, the tax started at 10%. Today, it is at 20% reaching points of being as high as 25% in some things.
Here is a table showing the history of the rates.
To be fair, not everything is taxed since there are exemption (such as food). However, the point is we see how the tax rate, over time, tends to drive upwards.
Redefine Rich
The easiest way for politicians to alter the taxes applied is to adjust the definitions. They do this by changing the tax brackets. One time the upper tier tax rate is applied to those over, say, $1 million. Then they will drop it to $750K or $500K. Eventually, rich is those making $250K or more.
In other words, what was sold as a "tax on the rich" gets altered to cover more people.
Here is a chart done by the University of Princeton Economic Institute. We can see how the tax brackets were changed over the years.
The point is there are a number of ways for them to monkey with the taxes. What is vital is to understand these never apply to who they claim when introducing the tax. It is always under the umbrella that "it is a small tax on the rich". This is exactly how the billionaire tax is being sold.
Of course, why not tax those billionaires? After all, they can afford to pay a bit more.
Well, how long until it becomes the millionaire tax? Again, millionaires can afford to pay a bit more.
Naturally, there are other ways to cast a wider net. How about taxing people the unrealized gains? Think that absurd? It already was proposed. This would mean that if you had a gain on an asset, such as a stock or cryptocurrency, you would owe the tax on that gain whether you sold the asset or not.
I am getting a bit off track here but this just shows the length politicians will go to for taxation. Enough is never enough.
So, the Billionaire Tax sounds like a great idea. Unfortunately, the history of taxation is that it never stays in the bracket they profess when selling it. Of course, they are also very willing to change the brackets to cast a wider net.
It is time to learn the lessons from the past. What is sold as a tax on the rich ultimately ends up falling to the middle class. Many taxes end up being regressive which end up hurting the poorest sections of the population.
Believing anything politicians say is pretty foolish. And to believe any of them have any idea what their doing is also a major mistake.
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